Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the latest Bank of England figures on the UK’s household debt levels:
“The UK took on an extra £900m of non-mortgage debt in February, before the real grip of the Coronavirus crisis took hold. The figures show that people have continually been taking on more and more non-mortgage debt every month for more than seven years – the last month we repaid more than we took out was October 2012.
“There’s no doubt there will be a boom in debt in the coming months, as people lose their jobs, see their salaries reduced or see available work dry up. While the hope will be that this is a short-term jump in credit card and overdraft uses that can be re-paid once people are back on their feet, the real concern is that people will quickly see interest rates mount up and debt start to spiral. The fact that one in eight adults have no savings at all, and 45% of the population have less than £2,000 in cash shows how financially exposed many people are.
“Banks – encouraged by the Government – have already announced some plans to help reduce the debt burden on individuals by waiving interest costs, penalty fees or certain charges. But many of these offers are over a short timeframe that won’t be long enough for people to get back into work and pay down their debt.
“Anyone who thinks they might struggle with their finances in the coming months – or are already struggling – should see what help they can get from their banks as well as the Government. Things like mortgage holidays, extension of credit, interest-free periods on overdrafts or payment holidays for loans can help in the short term. Those people who have a good enough credit rating to move their debt can also look at shifting to a 0% deal, with a number of 0% balance transfer credit cards still available.”
